I should point out (based on my experience working on brands in P&G, including conducting research, and later doing analytics) that blind tests are Blind Product or Packaging or Taste Tests, carried out to know more about product / packaging / taste related benefits that the consumer prefers vs your competing brand / s. In blind product test referred to, branding and packaging are removed and just usage tested. For more your may see this definition by Ipsos, a leading researcher.
Typically BPTs (blind product tests - most common) are used to compare product usage experience of your product with competitors’, to find out what attributes your product scores over competition and where it falls below, in the eyes of the consumer. Practically there will be some attributes where competition will score better; and some where you will. And, typically, in what is called the Overall Rating, both will broadly be similar. By and large true of most FMCG companies / categories. In some categories product attributes make a big difference in choice, like sanitary pads, and in some, little, like aerated drinks where taste or flavor is a personal like. These tests are carried out with the primary objective of knowing what product attributes consumers prefer that goes into deciding their overall rating of the product.This helps sharpen product focus (no need to spend money on attributes which consumer does not want), distinguish vs competition, and decide on product strategy (typically price vs value).
So in light of this, I fail to understand why a blind product test would be done among “most loyal customers” just to see whether they can identify the brand. Most cannot. In fact there is a case study of Pepsi vs Coke where in identified tests people preferred Coke and in blind, they preferred Pepsi. And then when New Coke was launched with “improved taste” it became a disaster. So much so that Coke brought back Old Coke ( New Coke replaced with Old, now called Classic! ). Of course this is a special case. But I can bet with good odds that this is true to a good degree in many FMCG brands. That is, your most loyal customers cannot differentiate your brands vs others in BPTs.
In my opinion, the observations are consistent (that even loyal customers cannot distinguish), but the conclusion is opposite. Even if people realize there is no difference between their brand (identified after BPT) and the other, or in fact is inferior, they will still buy their brand. Also note the other competing product found better is also a brand which also spends ( "extra money they are paying is for imagery and general product narrative "). So the consumer does not think (quite logically) that I will buy A over B because I am paying for imagery. Both A and B spend on imagery. And C who say just gives you exactly the same in a transparent unbranded plastic packet (say loose noodles instead of Maggi packaing) is avoided completely, even though it saves money on imagery / narrative.
I would restate this as “if two products are not vastly different from one another, the one that wins is the one that builds a stronger brand”. A stronger brand is the best deterrent from switching. Once you build a strong brand, all things remaining same (same distribution, direct costs, packing, consistency etc but slightly inferior product) , you get pricing power.